Professor of Public Management. He writes, blogs, and teaches about narrative and innovation.

Highway 407 Revisited

Just as Highway 61 (running from New Orleans to Duluth, Minnesota) kept reappearing in Bob Dylan’s life, Highway 407 ETR keeps reappearing in mine. I co-authored a book about it six years ago (If You Build it … at www.407etrbook.com), and I get asked to comment on its ongoing controversies.

I was just on Goldhawk Live on Rogers television, along with Ontario Transport Minister Jim Bradley, NDP transportation critic Peter Tabuns, Toronto Star reporter Jack Lakey, editor of Road Today magazine Manan Gupta, and a host of irate callers. The callers were incensed about several billing policies, including Ontario vehicle license denial for unpaid bills, attempts to collect unpaid balances going back up to 15 years, and 27 percent annual interest rate charges.

At the outset, it’s important to understand that 407 ETR’s business model is unlike most services in the economy (including old fashioned toll roads with collection booths) in that you can use it before you pay for it. This gives the operator, 407 ETR Concession Company Ltd., an incentive to be aggressive in collecting unpaid bills. What the operator prefers is that users lease transponders and have charges automatically billed to their bank account or credit card. Transponders are accurate virtually all the time. The $3.50 per trip collection fee imposed on video imaging is a strong incentive to lease a transponder, which costs $21 for a yearly lease.

By way of personal disclosure, I should say that I make about 20 trips yearly on 407 ETR and have had a transponder since the highway opened in 1997. I’ve had two small problems, a transponder’s battery wearing out and a transponder not functioning because I had placed it behind a metallic windshield sun shade, and both were handled quickly and videoimaging charges were refunded.

My guess is that somewhere in excess of 80 percent of the operator’s revenue comes from transponder users like me. As Pareto’s Law would predict, the administrative problems come from users who don’t have transponders. In an interview two years ago with co-author Chandran Mylvaganam and me, the operator’s spokesman told us that approximately 4 per cent of 407 ETR’s traffic is not billed, which includes both licenses that are not readable and those that are not billable because they are from jurisdictions that have not agreed to make their vehicle license data available. License plate denial is a very powerful mechanism for ensuring that Ontarians pay up, but of course it doesn’t extend beyond Ontario’s borders.

We heard numerous complaints on the program and it is hard to assess their validity. The most common complaint linked the three issues mentioned at the outset, claiming that the operator was deliberately taking its time billing, letting interest accumulate at a very profitable 27 percent per annum, and then using the threat of plate denial to collect.

If these accusations are true, they are a legitimate public policy concern. The question for a policymaker is what to do about them. Ontario Transport Minister Jim Bradley, citing the province’s failure to challenge the original privatization agreement in court, said that there was essentially nothing that could be done. The other panelists, myself included, weren’t so sure. Two possible approaches are suasion and legislation. Suasion would involve the government (perhaps the Ministry of Consumer Services rather than Ministry of Transport) gathering information about these complaints and presenting them to 407 ETR’s ombudsman and then the operator.

The operator is a Spanish-Australian consortium that has preferred to maintain a low public profile and collect the revenues rather than present itself as a high-profile good corporate citizen. This would suggest the government would get nowhere with suasion and the implicit threat of “naming and shaming,” but would have to legislate.
The legislative approach would not involve challenging the lease agreement, which the courts have already defended, but rather drafting consumer protection legislation applicable to all current and future Ontario toll roads, or perhaps even more broadly. This would require legal advice as to whether the courts would likely rule that such legislation contravenes the operator’s lease agreement.

Lurking down the road is an issue mentioned by Minister Bradley in the discussion, namely the development of Highway 407 East, a toll road running from the eastern end of 407 ETR in Pickering to Highway 35/115. The minister promised that the government would not repeat the mistakes of the past and 407 East would be built and run entirely by the government. A moment’s consideration suggests that likely will not come to pass. If it did, people would have to carry two transponders, one for 407 ETR and the other for 407 East, and would receive two bills for a single trip using both parts of the highway.

While the minister claims that this will lead to competitive benchmarking because drivers will compare the two operations, it is more likely that drivers will tell the two operators to get their acts together. In addition, obvious economies of scale will give both an incentive to make their technologies at least interoperable, and more likely completely integrated. Finally, by virtue of having developed and operated 407 ETR for over a decade, 407 ETR Concession Company Ltd. will have an enormous advantage over any other potential bidders for contracts on the development of 407 East. When the government moves to the contracting stage for Highway 407 East, it and 407 ETR Concession Company Ltd. will have to begin talking in earnest.

So if I were the Ontario Government, what would I do now? I’d gather information about billing practices and, if there are some that appear questionable, I would meet with the ombudsman and the operator. I would also get counsel to look at the question of whether consumer protection legislation would escape being over-ridden by the lease agreement. And I’d recognize that Minister Bradley’s “two operators, one highway” line will ultimately be untenable, and the two operators will have to talk about interoperability and integration.

12 comments

I truly believe the 407 ETR should be investigated. My entire family has not used the 407 since 2004 having moved to northern Ontario, 5 hrs away from the 407. Last year my elderly Mother received her first bill from the 407 for $198 from using said hwy in 2002 once. My husband has never received a bill from the 407 but yet they just put an amount owing on his credit report Sept 09. He has not used the 407 since 2002. I have just found a reciept for $135 payed to the 407 in 2007. I paid another past due amount Fed 2009 for $172, I will be contacting the 407 about this as I too have NOT used the 407 hwy since 2004. We think there is definitely something funny going on.

For the past several months, I’ve been trying to obtain a statement of my 407 account. Due to an error at the 407, I have not been issued a bill for nearly 2 years. The issue has been elevated to the Better Business Bureau, 407 Ombudsman and the 407 President’s Office. The 407 customer service rudeness, inaccuracies, accusations, refusal to provide detailed billing, threats of plate denial and astonishingly poor customer service has, not surprisingly, failed to resolve my issue. In the meantime, my account is accumulating interest. I’ve also complained to my MPP and the Transport Minister. I have been left with no other option but to pay for services that I have not been billed for (otherwise I could not renew my vehicle permit).

Following this experience, I’m left to wonder:
– why does a private company have the ability to use the MTO for collecting fees (particularly without being required to bill the user)?
– what is the use of having an Ombudsman, who is not impartial?
– why won’t the Minister of Transportation step-in and correct or improve this inappropriate system and protect Ontario Residents?
– why is there not a proper customer service system, ensuring the rights and dignity of Ontario residents are protected?
– why does a private company have access to private files at the MTO? (note: the 407 ETR office claims they receive address information from the MTO; the MTO office denies this).

Ask anyone who has been forced to deal with the 407 ETR customer service people; I

Hi! I just ordered your book Planes, Trains, and History from Chapters and I can’t wait to dig into it. I have been very active collecting horror stories with regards to the billing practices of this company and I can tell you for a fact, from personal experience, stories from others attached to our website and facebook group, as well as documentation I dug up on the companies very public practice of invoice supression to reduce postal costs… that absolutely YES!!! The numerous complaints you heard on the program is true. I have been pointing this out for about 6 years now.

We absolutely need to do something about this. You can contact me for more info.

“If” some billing practices were questionable?
I erroneously took the 407 road to hell 8 years ago.
The original charge was $7.80. I was double billed.
I called & disputed the second charge, paid the first,
and was assured the problem had been cleared up.
4 years later, upon attempting to renew my plates, I get a bill for over $300.00
As I have no choice but to drive where I live, I had no choice but to pay.
Fast forward another couple of years. Same deal.
I now have a new bill for yet another $41. Interest.
On an original charge of less than $8 bucks, I have now paid close to $800.
The ombudsman will do nothing for you, nor will any other agency related to this.
If you drive the ETR, get out your wallet folks, because if you don’t have a transponder, you are going to pay. Again. And again.
I’m quite certain that when I die, my family will have an ETR bill to pay…
Our government has allowed this company to extort us, fellow Canadians!
I’m seriously considering parking a transport truck or two sideways across 4 lanes of traffic. Guess where? Tammy…you can ride shotgun, I’ll buy the Tims.

I did this about 7 months ago when I first set up the facebook group http://www.youtube.com/watch?v=kvPNMXzFTnM the stories are real. We need this addressed. I have asked Dalton McGuinty to open another panel because I have tons of stories. Most of the ground work is already laid for collecting them.

I firmly believe that the 407 SHOULD be investigated! I have also been one to experience their interesting interest charges of over $18,000.00!!!

I ask the same question time and time again…. if the 407 is a private corporation, why is it they can do things that would normally be deemed illegal to any other private corporation… high interest charges and long periods of charging, charging without letting the client know that they are still being billed… the list goes on and on!

This gentleman has no interest in helping to change what is wrong with this highway, however, his issue with them is well documented here. I am going to follow his pattern and do the same. But to say that our stories can’t be verified… I would say they can http://www.chrisgreaves.com/ClearThinking/407ETR/407ETR.htm

Hello,
I am close to someone that has the inside scoop on 407. This needs to be looked into,
i believe the taxpayers are picking up the bill for the HYDRO that is being used by the 407. I was told the amount and it was huge. I’m sure this offshore highly profitable entity
can afford their own bills … not to mention collect their own receivables.
Be Happy.
Steve

I just moved back here from BC after being gone for 7 years; When I went to plate a vehicle I just bought I was told there was $1195.00 in unpaid toll charges from the 407. When i contacted the 407 ETR Office of the President I was told the original bill was for $100.00 and that interest was added on to that from 1997 and 2003 use of the highway. WTF … I never received a bill, they can’t tell me what vehicle the 97 bill was plated to … I was told by the representative that it was my responsibility to contact 407 and MTO of any address change throughout the years … now I plated my vehicle fine up until I left in 2004, now why the … would I contact them from another Province on something I didn’t know of in the first place because I got no bill on something that was made law as of 2006 …. your kidding me right … I mentioned that my husband was going in for major surgery Thursday and that when I bring him home and something should happen I have to get him to hospital and I don’t have a vehicle plated I will hold them partially responsible; his response was I can adjust your account but it will take 10 days for the MTO to get the adjustment and by the sounds of things I didn’t have that time so why don’t I just go and pay it so I have a vehicle …. extortion you think …. I have contacted the Toronto Star whom said they might be interested in writing another story, I feel that if enough people called them about their story we could get something going Province Wide like a boycott of the highway, province wide petition or a class action lawsuit …. we need to make noise as citizens of this province ….. there is also a face-book group started …. unbelievable what this Province has become …..

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